Expectations from RBI Pre-MPC Meeting

Since the Reserve Bank of India (RBI) is anticipated to lower the repo rate once more in its next monetary policy review, housing demand is anticipated to increase significantly in FY26. Experts in the field predict that this action will raise purchasers' purchasing power and lower the cost of house loans.

Udit Jain, director, ONE Group Developers says

Home loans play a pivotal role in home buying, particularly for end-users, as the majorities rely on financing to purchase their dream homes. A reduction in interest rates directly impacts affordability, making homeownership more accessible and boosting demand across all segments of the housing market.

In its last Monetary Policy Committee (MPC) review meeting, the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points after maintaining a consecutive status quo for eleven meetings. This marked the beginning of a much-anticipated rate cut cycle, and we expect further reductions in the upcoming MPC meetings.

A sustained decline in interest rates is expected to act as a catalyst for the residential real estate sector in FY 2025-26. Lower home loan rates will not only reduce the overall cost of borrowing but also enhance loan eligibility, encouraging more buyers—both first-time homeowners and upgraders—to enter the market. Additionally, with increasing urbanization and strong demand for quality housing in metro and Tier II cities, favorable lending conditions will further accelerate the growth of the housing sector in the coming year.

Sahil Agarwal, CEO, Nimbus Developers says,

Real estate demand continues to remain robust, particularly in the high-end and luxury segments, driven by strong investor confidence and rising aspirations for premium living. The anticipated softening of home loan interest rates is expected to further fuel this momentum, making homeownership more attractive for both end-users and investors.

In the last MPC meeting, the RBI Governor indicated that macroeconomic conditions are aligning favorably, paving the way for further measures to support economic growth. A repo rate cut is one such key intervention that could significantly impact borrowing costs. Economists and market experts anticipate an additional reduction of 25 to 50 basis points in the upcoming monetary policy review, which, if implemented, will provide further stimulus to the housing market by enhancing affordability and improving loan eligibility for buyers.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd says,

We anticipate further rate cuts in the upcoming RBI monetary policy review in April, given the continued decline in inflation and improved liquidity conditions. The RBI’s rate cut cycle, which began with a 25-basis point reduction in February, is expected to see another cut of approximately 50 basis points in April, with the possibility of an additional cut in the June review meeting.

Lower interest rates reduce borrowing costs for consumers, thereby increasing their affordability and eligibility for loans. If the RBI proceeds with a 50-basis point rate cut in April, coupled with the previous 25-basis point cut in February, the cumulative reduction in repo rates will stand at 75 basis points (0.75%). This will have a significant impact on home loan borrowers.

For instance, if someone is planning to take a home loan of Rs. 75 lakh at an interest rate of 9% for tenure of 20 years, their current EMI would be approximately Rs. 67,493. However, if the interest rate drops by 0.75% (from 9% to 8.25%), their EMI will reduce to approximately Rs. 63,901. This results in a monthly savings of about Rs. 3,592 and a total savings of nearly Rs. 8.62 lakh over the loan tenure.

Additionally, lower interest rates enhance loan eligibility. For the same EMI of Rs. 67,493, the loan amount that a borrower could avail at 8.25% interest (instead of 9%) would increase to approximately Rs. 79.2 lakh. This means a potential homebuyer can now afford a property priced higher than before, further stimulating demand in the housing sector.